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Hi-tech decline for NZ?

NZ has always prided itself on having a small but very competent hi-tech sector.

The "Kiwi-can" and number-eight wire technology has seen a number of NZ companies come up with some world-class products that have achieved significant success in the global marketplace.

NavMan was a strong player in the sat-nav market, Rakon lead the way in the somewhat esoteric realm of crystals and high-performance electronic timebase components.

Likewise, Tait Electronics in Christchurch were seen as a leading light in the area of mobile radio systems, proudly boasting a long list of valuable customers from around the planet.

So what's gone wrong?

First-up, NavMan was sold lock, stock and barrel to an offshore buyer.

Later, Rakon's shining star began to dim and the gloss has certainly rubbed off this once strong beacon of NZ's tech-competence. Those who invested in Rakon a year or two ago must be reflecting sadly on prudence that decision today.

And now we hear that Tait is to shed another 50 workers in the latest of a growing list of cost-cutting measures designed to keep its ledgers in the black.

Xero is probably the only well-known Kiwi hi-tech player who still looks to be on track but even then, a number of respected commentators believe that they are simply enjoying a "bubble" and that their shares are significantly over-priced. If those commentators are right, it's only a matter of time before an adjustment also dims the outlook for this company.

So what's the problem?

Is it NZ's high dollar? Has this meant that previously very profitable Kiwi companies are simply finding it harder and harder to keep up with competitors?

Is it the lack of NZ investment in R&D? Has this meant that we've been sitting on our laurels for far too long and now our competitors are bringing newer, better technologies and products to the marketplace while we're not?

Is it because we're only a one-trick pony? Could it be that we foolishly focus on "flavour of the month" industries (currently the dairy sector) to the cost of all others and without any consideration of the future?

To be honest, I have no bleeding idea.

What I do know is that we appear to have a problem.

Maybe the real problem is that too much of this country's money is now tied up in real estate -- making it increasingly harder for the hi-tech startups we need if we're to retain a presence in hi-tech markets to scrape up the venture capital they need to get going and turn good ideas into commercial realities.

What can not be denied is that our housing stock is grossly over-valued (when compared to the average wage). Compared to most Western nations, NZ's population has an atrociously low investment in productive enterprises -- effectively strangling the funds those companies need to innovate, develop and expand.

Many Americans proudly boast about their personal portfolio of stocks -- most Kiwis have none -- they spend that money doing up the bathroom or buying a rental property.

I'd wager that the single biggest problem holding back this country's economic prosperity is the fact that we've created the nasty situation where a massive amount of this nation's wealth is tied up in the homes we live in -- and that wealth is largely illusory.

If the bubble which supports these ridiculous valuations ever bursts, the fallout will be far, far greater than the stockmarket crash of the 1980s. Huge swathes of new home-owners will be thrust into a negative-equity situation, the economy will dive, unemployment will soar and thus mortgagee sales will skyrocket. Those mortgagee sales will further increase the intensity of the decline by adding further pressure to the fall in property prices.

Sadly, the outcome of this will be that the rich will become even richer and the poor will become even poorer.

I had once thought that because those making the decisions inevitably have a huge percentage of their own wealth tied up in property, they would ensure that this bubble never bursts but, on reflection, the fact that they stand to make far more money in the long run (by using their realisable wealth to increase their holdings at these fire-sales) means I'm now not so sure.

Wake up NZ.

It's time to stop throwing your money in to areas where it produces *no* real returns for the country. Capital gains do nothing for NZ's situation. It earns no export receipts and it employs nobody.

Our money should be going into productive ventures that employ Kiwis, generate export dollars and increase the total wealth of the nation. If we don't do that then things can only get worse.

As I've predicted in the past -- one day we will wake up to find that we are nothing more than tenant workers in this country. Property will be too expensive and our major industries will all be the property of offshore owners.

Hello... is anyone driving this ship?

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